Virgin Atlantic has signalled its determination to fight back against heightened competition on the lucrative London-to-New York corridor by hiring an American Airlines executive as its new boss.

Craig Kreeger will replace Steve Ridgway next month, after a 27-year career at AA where he presided over the carrier's airport operations, inflight service and baggage handling as senior vice president for customers. He was chosen ahead of the favourite internal candidate, Julie Southern, Virgin Atlantic's chief commercial officer.

Kreeger must tackle a series of strategic challenges faced by Virgin Atlantic, headed by the growing competitive threat in the transatlantic market and the launch of a Heathrow-to-Scotland short-haul business.

His appointment follows an overhaul of Virgin Atlantic's ownership structure last year in which America's Delta Air Lines took 49% in the carrier launched by Sir Richard Branson in 1984. Delta bought the stake from Singapore Airlines in a £224m deal and announced an alliance with Virgin Atlantic that allows the two carriers to co-operate on setting fares and flight schedules, which will require clearance from competition authorities.

Branson, Virgin Atlantic's president, underlined the importance of the Delta alliance in the appointment of Kreeger, who has worked on airline joint ventures at AA. He said: "We are thrilled to welcome Craig to Virgin Atlantic – he is the right person to succeed Steve Ridgway at this dynamic and challenging time for our airline. We believe Craig has the experience and passion to drive Virgin Atlantic forward and capitalise on the opportunities created by our new venture with Delta Airlines."

Virgin Atlantic reported a pre-tax loss last year of £80m, which it blamed on economic uncertainty, high fuel costs and flight taxes imposed by the UK government.

Douglas McNeill, analyst at Charles Stanley Securities, said: "Not content with copying the transatlantic joint venture that American formed with BA, Virgin Atlantic has now poached one of its senior executives, as well. The new man's goal must be to restore profitability to a level commensurate with the tremendous strength of the brand."

Virgin Atlantic has waged a public relations battle against AA in recent years in a bid to prevent AA and British Airways from signing a transatlantic alliance that would allow the carriers to collude on setting fares, schedules and routes. The campaign failed and the launch of the joint venture underlined the scale of the competitive threat faced by Virgin Atlantic. It owns 3.3% of the slots at Heathrow airport, whereas BA alone controls 52%. Between them, BA and AA control 60% of transatlantic seats.

The Delta/Virgin Atlantic alliance will resemble the AA/BA deal and represents the resumption of a more conventional rivalry between BA and Branson's carrier after a recent outbreak of verbal hostilities between the tycoon and BA's ultimate boss, Willie Walsh.

Walsh, chief executive of BA's parent, International Airlines Group, last month bet Branson a "knee in the groin" that Virgin Atlantic's brand would disappear in the wake of the Delta deal.

However, Kreeger can expect a less tumultuous relationship with Walsh, who has emphasised his respect for Ridgway's abilities in the past, reserving his ire for Branson.

Kreeger said he was looking to build "the next exciting chapter" at Virgin Atlantic. He said: "It is a great airline renowned for its customer service and innovation. I have been competing with it for many years but have always admired its laser focus on its people, its products and its customers."